Feds report ‘high’ demand for emergency oil

Oil companies and traders submitted more than 90 offers to buy some of the 30.24 million barrels of crude being released from the United States’ emergency stockpile, the Energy Department announced today.

“Industry interest . . . was very high” and the sale of light, low-sulfur crude from the Strategic Petroleum Reserve was “substantially oversubscribed,” according to the department.

Administration officials said the move was essential to restoring stability to the market and offsetting the loss of 1.5 million barrels of high-quality light, sweet crude oil daily from Libya during the summer driving season.

The high demand for the reserve oil stands in contrast to a lackluster response to the last Strategic Petroleum Reserve auction. After Hurricane Katrina damaged pipelines, offshore rigs and refineries in 2005, the U.S planned to sell 30 million barrels of crude from the reserve, but ultimately auctioned off just 11 million barrels .

Today’s announcement did not say who placed bids for the oil, or which offers were deemed “apparently successful.” But in an Energy Department conference call on the sale earlier this week, traders were seeking information along with refiners, signaling that some of the crude may not be immediately headed to refineries.

The government does not bar successful bidders from storing oil for later use or resale. But it does bar the winners from exporting any of the stockpiled crude unless they return an equal volume of refined product to the U.S.

The flood of offers for the emergency oil surprised some market analysts, because the sale comes at a time when U.S. inventories continue to hover near record levels.

Storage tanks are full in part because of bottlenecks at a major oil hub in Cushing, Okla., which has recently begun receiving more Canadian crude via pipeline and more domestic crude from U.S. fields, including the Bakken Shale formation in North Dakota.

David Pursell, managing director of the Houston-based investment bank Tudor, Pickering, Holt & Co., said the surge of would-be buyers could be a sign of traders bullish that oil prices will climb or an indication of real fear about the availability of the light sweet crude that refiners prefer.

“The current market data says we’re okay — we’ve got plenty of crude in inventory — and prices have been coming down, even before the release was announced,” Pursell said. “So it didn’t feel like there was a panic.”

But, he added, there may be fear “that things could get tighter,” especially if Saudi Arabia isn’t able to ramp up its production as quickly as planned.

Winning bidders of the SPR oil must arrange for transport of the crude, whether to tankers, onshore storage or refineries.

The Obama administration originally considered issuing a blanket waiver of the Jones Act, which generally requires American ships and crews to be used whenever goods are transported between U.S. ports. But the administration later reversed course and said it would consider issuing those waivers only as needed.

2 Responses

Of course they are going to say that, but the release at this time was ridiculous and he knows it. Just recognize that every single thing he does from now on is a calculated campaign act. There is no president — it is simply that man behind the curtain.

A high demand???? Are you and the government serious???? Why does the LSMedia and the government tell so many lies???? It used to be that the Media questioned everything that the government said…. Now since Nobama has taken over it is like you all have become like PRAVDA used to be like…. Government mouth piece…. I do wish that all of the media wold go back to being what they used to be and that is fair and objective and questioned everything anyone did…. Now is seems like you all bow down to the ‘one’ the moment him or any of his minions speak….

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